Financial markets showed mixed behavior as traders processed statements from Federal Reserve officials, while Bitcoin made headlines by reaching new all-time highs and rising inflation data from the UK added to the mix.
Let’s dive into today’s key market developments!
Headlines:
- Australian Leading Economic Index improved from –0.20% to +0.26% in October
- Japan trade balance for October 2024: -¥461.2B (-¥320.0B forecast; -¥294.1B previous)
- As expected, China’s one-year Loan Prime Rate (LPR) was held at 3.1%, and the five-year LPR, which often influences mortgage rates, is steady at 3.6%
- Bitcoin broke past $94K to make new all-time highs, nearly touching the $95K mark
- U.K. CPI for October 2024: 2.3% y/y (2.1% y/y forecast; 1.7% y/y previous)
- U.K. PPI Input for October 2024: -2.3% y/y (-3.0% y/y forecast; -1.9% y/y previous)
- Germany Producer Prices Index for October 2024: -1.1% y/y (-0.9% y/y forecast; -1.4% y/y previous)
- ECB Vice President Luis de Guindos warns against rushing interest rate cuts
- Bank of England Deputy Governor Dave Ramsden indicated openness to faster rate cuts if uncertainty diminishes
- Fed Governor Lisa Cook suggested gradual adjustment toward neutral rates
- Fed Governor Bowman noted stalled inflation progress, advocating cautious rate cut approach
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Asian session activity was relatively subdued, with limited impact from China’s Prime Loan rates announcement and Japanese trade balance data. Market correlations showed mixed patterns throughout the session.
Activity picked up during London hours, characterized by:
- Bitcoin’s steady climb toward new all-time highs
- Modest gains in oil and the U.S. dollar
- Upward pressure on bond yields
- Slight weakness in equities and gold
The apparent driver was likely diminishing expectations for Fed rate cuts, while Bitcoin possibly benefited from the recent launch of Bitcoin ETF options trading. Oil gains may have been influenced by escalating Ukraine-Russia tensions, despite rumors of potential cease-fire discussions.
The U.S. session saw a shift toward risk aversion, evidenced by:
- Declining equities and oil prices
- Falling bond yields
- Rising gold prices and U.S. dollar strength
- Bitcoin retreating after nearly reaching $95,000
This risk-off move might have been triggered by Target’s significant earnings miss and reduced full-year guidance, reflecting weakening consumer discretionary spending. Oil prices faced additional pressure from the EIA report showing a 545,000-barrel increase in crude inventories, following last week’s 2.05 million barrel build.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar maintained a strong bid throughout Wednesday’s session, despite limited U.S. economic releases. This strength likely reflects growing expectations for a slower pace of interest rate adjustments, supported by:
- Robust U.S. economic data
- Signs of potential inflation reacceleration
- Cautionary statements from Fed officials
While Fed Governors Cook and Bowman both advocated for a careful approach to rate cuts in their public comments, these statements appeared to have minimal direct impact on dollar movements during the session.
Upcoming Potential Catalysts on the Economic Calendar:
- BOJ Gov Ueda Speech at 00:10 GMT
- French Business Confidence at 02:45 GMT (Actual: 92.0, Previous: 92.0)
- RBA Bullock Speech at 03:00 GMT
- CBI Industrial Trends Orders at 06:00 GMT (Actual: -23.0, Forecast: -27.0)
- U.S. Initial Jobless Claims at 08:30 GMT (Actual: 224.0k, Previous: 217.0k)
- Philadelphia Fed Manufacturing Index at 08:30 GMT (Actual: 11.0, Previous: 10.3)
- U.S. Existing Home Sales at 10:00 GMT (Forecast: 3.87M, Previous: 3.84M)
- Fed Goolsbee Speech at 12:25 GMT
- Fed Hammack Speech at 12:30 GMT
All eyes will likely be on Bank of Japan Governor Ueda speech as any comments on potential action against currency speculation will likely get the Japanese yen jumping.
U.S. Initial Jobless Claims tends to be a consistent short-term mover as well, but with more Fed speak after the London close, it may be a good idea to not be too stuck in any Dollar moves until after their commentary.
Make sure you’re glued to the tube in case we see increased volatility during their events, and don’t forget to check out our Currency Correlation tool when taking any trades!